Investors are seeing the kind of earnings numbers that make them feel confident about stocks.
The stock market stepped to new highs for the year yesterday after a handful of earnings reports bolstered hopes that the economy is recovering sooner than many analysts had thought.
That is helping some investors move past a bout of nerves about whether expectations for the economy are stretched too far. Yesterday, the Dow Jones industrial average rose 96 points, and the Standard & Poor's 500 index rose but ended just shy of 1,100, having topped that level during the day.
Industrial equipment maker Eaton Corp. said it was seeing improvement in key markets and raised its full-year profit forecast. Newspaper publisher Gannett Co. managed to post a profit despite a sharp fall in revenue, and toy-maker Hasbro Inc.'s income rose on cost cuts.
A drop in the dollar also helped push commodity prices higher, which in turn helped stocks of materials and energy companies.
Investors are relieved to see better results in a broad range of industries after some downbeat news last week from major banks, which reported rising loan delinquencies as consumers and businesses struggle with paying debts.
The day's gains came ahead of quarterly earnings reports from Apple Inc. and Texas Instruments Inc. Last week, Google Inc. and chipmaker Intel Corp. posted solid earnings and raised expectations for the industry.
Caterpillar Inc., Coca-Cola Co. and DuPont are scheduled to report results before the opening bell today.
Burt White, the chief investment officer at LPL Financial in Boston, noted that three of every four companies have topped analysts' expectations for earnings in the July-September quarter. Although most have yet to report, the early results are a sign that companies are holding up better than many had predicted.
"The recovery is moving faster than analysts can sharpen their pencils and revise their estimates upward," he said.
According to preliminary calculations, the Dow rose 96.28, or 1 percent, to 10,092.19. The broader S&P 500 index rose 10.23, or 0.9 percent, to 1,097.91. For both indexes, it was the highest close since Oct. 3 last year.
The Nasdaq composite index rose 19.52, or 0.9 percent, to 2,176.32.
Investors grew hopeful that Federal Reserve policymakers would be able to withdraw some of the money supporting the economy as conditions improved. That could help prevent inflation, which has become a concern in the markets because of the huge amounts of money the government has pumped into the financial system.
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